Yeah! Where was Washington?

The New York Times has a good piece on the total lack of interest on the part of Washington to listen to the many voices of reason who were warning about the subprime crisis. I think overall though it lets the Feds off too easy, especially Alan Greenspan. The discussion with Greenspan has some interesting issues.

1. Greenspan said “The housing bubble had far less to do with the Fed’s policy on interest rates than on a global surplus in savings that drove down interest rates and pushed up housing prices in countries around the world.”
I think that this is disingenuous. For most of the past 6-7 years the Fed was more interested in keeping interest rates down to keep the housing market going as the only sector keeping the Bush economy afloat, then global savings. Also isn’t America’s problem is that compared to the rest of the world, we don’t have any savings? Boy. making credit cheaper has certainly help that.

2. As for his role as a regulator, Mr. Greenspan argued that the Fed was ill-suited to investigate deceptive lending practices.
He hits this one right on the head stating “The problem has always been, what basically does the law mean when it says deceptive and unfair practices? Deceptive and unfair practices may seem straightforward, except when you try to determine by what standard.”

This is also the problem with most consumer laws. Deceptive practices are really a “I know it when I see it” kind of thing, which is exactly what juries are for. (See Tort Deform)

3. Greenspan also contended that the Federal Reserve’s accountants and bank examiners were ill-suited to the job of investigating fraud, saying “It becomes essentially an enforcement action, and the question is, who are the best enforcers?” “A large enough share of these cases are fraud, and those are areas that I don’t think accountants are best able to handle.”

Well then why did he let the OCC take over sole responsibility (read as block the states and their AG’s from enforcing any of the lending laws including the federal laws) for regulating banks?